Arm doesn't want to merge with body
The reason you cannot merge the body and the arm together is that they are not the same type of object. The body is Mesh object, while the arm is a Curve object. You may only merge if both objects are the same type (with certain limitations, e.g. you cannot merge two Lamps, or two Cameras). 

In order to merge the arm with the body you will need to first convert the arm to a mesh by selecting it and pressing ALT+C > Mesh from Curve/Meta/Surf/Text. 

After converting you can then merge the two mesh objects with CTRL+J.